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Brookfield JV pockets $333M in commercial mortgage refi

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Brookfield Property Partners and Nuveen Real Estate are taking out $333 million in equity via a commercial mortgage refinancing for jointly owned, signature Las Vegas Strip shopping center.

Brookfield and Nuveen are benefiting from a nearly $1 billion, cash-out refi loan that will pay off $627.3 million in existing debt for the luxury Grand Canal Shoppes retail, entertainment and dining complex.

The loan will be financed partially through the commercial mortgage-backed securities market, including to the newly launched $747 million Morgan Stanley Capital I Trust (MSCT) 2019-H7 that will be apportioned a $70 million share of the $975 million, 10-year loan.

The loan, with the Brookfield/Nuveen joint venture as a guarantor, was underwritten by Morgan Stanley, Goldman Sachs, JPMorgan and Wells Fargo, according to reports from S&P Global Ratings and Kroll Bond Rating Agency.

The Grand Canal Shoppes loan is the largest collateral piece in the MSCT 2019-H7 transaction, which will include 13 classes of principal and interest notes, three receive interest only and another that is entitled only to excess interest. Six Class A note tranches have final AAA ratings from Kroll; five of those tranches have final AAA ratings from S&P.

Grand Canal is a 759,891-square-foot specialty retail, entertainment and dining complex that takes up the first three levels of both the Venetian Hotel and Casino and the neighboring Palazzo Resort and Casino. The complex is over 94% leased to 200 tenants, according to Kroll, and generated total sales of $427.6 million for the 12-month period prior to February 2019.

The property has been appraised at $1.68 billion. The existing debt was previously securitized in a 2012 CMBS sponsored by Goldman Sachs.

The loan is among 50 loans secured by 81 properties included in the MSCT deal, and the largest of five loans with investment-grade characteristics.

The collateral properties in the deal are in 45 metropolitan statistical areas, including New York (where 20% of the assets are based), Las Vegas (10.2%), Los Angeles (9.4%), Atlanta (8.1%) and Raleigh, N.C. (4.2%).

The largest sector exposure is to retail properties, making up 33.1% of the pool, followed by hotel/lodging (19.6%), and office (13.1%). Kroll noted it was the third-highest lodging industry exposure among conduit deals rated by the agency in the past six months.

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